Millionaire George Osborne denies he’s a highest rate taxpayer

Speaking on the Today Programme earlier, George Osborne has denied he is a highest rate taxpayer who would benefit from the 5% cut he announced yesterday. His £134,565 salary puts him just £15,435 shy of the higher rate (aka additional rate) tax band.

When challenged by Evan Davis that he had other sources of income which would put him over the line, Osborne retorted:

“I’m not, actually.”

But the Register of Member’s Financial Interests reveals he has been in receipt of rent from a property in London since at least July 2011.

What property in London can you rent for less than £16,000 per year?

[update id=”rental-income” time=”09:14″ text=”According to DirectGov, rental income is still treated as a business, so not taxed as earned income. Is this how Osborne can make his claims today?”]

[update id=”notting-hill-flat” time=”09:28″ text=”This is the house which Osborne’s family lived in until they moved into Downing Street at exactly the same time the rental entry appears on the register. We somehow doubt you could rent this for less than £307 per week.”]

[update id=”rent-tax” time=”09:41″ text=”From DirectGov: “Your taxable profit from property letting is added to your overall income. If this is more than your tax allowances you’ll pay tax on it at normal Income Tax rates.” — unless you’ve set up some other legal vehicle?”]

[update id=”osborne-and-little” time=”10:31″ text=”The Guardian‘s Polly Curtis is reporting that Osborne owns a 15% share in family wallpaper firm Osborne & Little. But the firm made a staggering loss in 2010-2011 and didn’t pay dividends, so wouldn’t contribute to his taxable income for the last year.”]

[update id=”tax-dodges” time=”11:45″ text=”Scrapbook has spoken to a tax expert about methods which Osborne may have used to keep his rental income out of his taxable income. The simplest would seem to be a joint ownership with his wife owning a higher percentage of the property- Osborne then paying tax on less than half of the income. Alternatively, he could have extensively refurbished the property after moving into Number 11, to count the amount of the expenditure as deducatable. Both of these methods are, at present, legal”]

Samsays:

This is really quite simple. The flat could be owned, for example, by a company which is itself owned by the Osbornes. That company would pay corporation tax on the net proceeds from the property (e.g. after deducting the costs of letting the property and any mortgage – there’s nothing to have stopped them from remortgaging the property). The company could then choose to pay dividends as and when they choose, or could even pay dividends to their children.

Bill Edmundssays:

I am sure that George Osborne was covered in the Channel 4 program on Tory Tax Avoiders and admitted that he took advantage of Tax Avoidance schemes but added, with a smirk, that it was all perfectly legal and that everybody did it. So that might be the reason he is not a higher rate Tax Payer. In theBudget statement Francis Maude looked very worried when Ed was asking about Cabinet Tax Payers.

Joe Hillsays:

@Sam: yep. It’s almost certainly an arrangement like that. Or to put it another way, the Chancellor of the Exchequer has deliberately arranged his financial affairs so as to (legally) avoid paying tax. Justsayin.